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Executive Interviews: Interview with Venkat Ramaswamy on Co-Creation
April 2010
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By Dr. Nagendra V Chowdary
Venkat Ramaswamy Professor of Marketing and Hallman Fellow of Electronic Business at Ross School of Business, University of Michigan. 
Professor, it’s been almost 10
years since you (along with CK
Prahalad) published that pathbreaking
article, “Co-Opting
Customer Competence”, in HBR
January-February 2000. You
followed this up with the same
theme in Sloan Management
Review’s article (Summer 2003)
“The New Frontier of Experience
Innovation” and The Future of
Competition: Co-Creating Unique
Value with Customers (HBS Press)
in 2004. What were the factors that
triggered this new dimension of
corporate strategy? What specific
business happenings motivated you
to embark on a collaborative research
with CK Prahalad on co-creation?
Can you take us through how the
concept of co-creation evolved, was
interpreted and embraced through
those three distinct publications?
Sure. After the initial dot-com boom
and then bust, it became evident that
businesses had missed the
fundamental shift beneath the Web.
They were focused on exploiting it
in traditional ways at the time. You
will recall phrases like “eyeballs”,
“last mile” etc. All these reflect the
one-way firm-centric mindset of
value creation: from the firm to the
customer. Meanwhile, customers
were exploiting the Web for
themselves, getting more informed
and connected. So, we asked
ourselves a simple question: What
would happen if a billion people
became networked in this fashion?
How would it change the dynamics
of value creation? For starters,
customers were forming
communities on their own,
independent of the firm. They were
extracting away value in the system.
So, the next question on the supply
side was: could customers become a
source of competence to firms? That
led to the HBR article “Co-opting
Customer Competence”. Then came
the next issue: Customers have
always derived value based on their experiences. That’s not new. But
what was new was for companies to
start thinking about innovation in
terms of experiences. Hence, we
coined the term “experience
innovation”, which has become
popular today. These two shifts – of
customers as a source of competence
and experiences, not just goods and
services as the basis of value and
innovation –were expanded upon in
my book The Future of Competition,
with Professor C K Prahalad. We
have discussed several examples
there of these emerging practices at
that time.
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How did the relationship between
the customer and the company
change over decades and what did
this change mean for business
practices? What specific trends do
you think are warranting companies
to look beyond the traditional value
creation and embrace co-creation as
the new competitive platform?
The customer has traditionally been
viewed as a “target to be had”. That
may seem difficult to accept today,
and that’s the point. Customers were
seen as passive pockets of demand for
the goods and services that the
company could sell. This still holds,
i.e., selling goods and services, but
what has changed is that the
informed, connected, and
empowered customer have different
expectations today. They want to
have a say, their voice heard. They
want to influence what companies
sell to them. What companies were
not realizing was that this was good
for them. Now with the Great
Recession, and even prior to that,
companies were realizing the limits to
the traditional cost-based and
product-/service-centric view of
value. But with the advent of social
media, the ground swell grew and
companies began to feel the pressure
from the customer end. At the same
time, globalization and fragmentation of the value chain began to
commoditize companies on the supply side. Companies had to
partner and become part of complex
business networks. After The Future
of Competition was published, I
continued my personal journey,
exploring with managers and
companies around the world what
these shifts meant to them. I
discovered many companies who
had begun to grasp the significance of
these shifts. I saw companies
innovating what I call “engagement
platforms” – ways of engaging
customers to create value together.
These engagement platforms revolved
around the offering itself (e.g.,
Nike+); websites (Starbucks and Dell
engaging their customers in
generating new ideas); physical stores
(e.g., Apple Store and its Genius Bar
and Caja Navarra’s bank branches in
Spain); call centers; private and
public community spaces (e.g.,
Sunsilk Gang of Girls); and even live
meetings (e.g., Club Tourism in
Japan). All of this and much more is
discussed in my new book
forthcoming this year, The Alchemy
of Co-Creation, co-authored with
Francis Gouillart (Simon & Schuster’s Free Press, 2010). What is the purport of this next
book The Alchemy of Co-Creation?
What new dimensions and
arguments have been added?
Actually, it’s more than just adding
new dimensions and arguments.
First, I have expanded how we think
about co-creation: it is about all
individuals engaged in a process of
mutual value creation, whether as
customers, employees, or any other
stakeholder. The core principle is
using engagement platforms with an
experience mindset to create mutual
value together. That may not seem
different at first. But as we show
“experiences” are not just at the end
of the value chain, but everywhere in
the system, of anybody in the system.
Further, co-creation is not about just
personalization. It is as much about
“learning” from customer experiences
through dialogue with them. So, cocreation
can also be applied with
standardized offerings. In this view,
co-creation also implies a
transformation of management
processes inside the company,
together with employees. It is difficult
for companies to co-create with
customers, if they can’t co-create with
their employees. We have lots of
examples in the book, which are hard
to describe here.
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